Stock Bldg. Supply, LLC v. Crosswinds Cmtys., Inc.

317 Mich.App. 189

893 N.W.2d 165

STOCK BUILDING SUPPLY, LLC

v.CROSSWINDS COMMUNITIES, INC.

Docket No. 325719.

Court of Appeals of Michigan.

Submitted March 4, 2016, at Detroit.

Decided Sept. 13, 2016, at 9:00 a.m.

Sugameli & Sugameli, PLC, Troy (by J. Paul Sugameli ), for Church & Church, Inc.

Miller Canfield Paddock & Stone, PLC, Detroit (by LeRoy L. Asher, Jr., and Lara L. Kapalla ), for Howard Hanson III, Catherine B. Hanson, Hong Doan, Michael Colman, U.S. Bank, NA, and Bank of America, NA.

Schneiderman & Sherman, PC, Farmington Hills (by Jonas M. Parker ), for William Davidson and Laura Davidson.

Before: RONAYNE KRAUSE, P.J., and JANSEN and STEPHENS, JJ.

STEPHENS, J.

In this receiver action, third-party plaintiffs, Church & Church, Inc., doing business as Church's Lumber Yards and Church's Builder Wholesale (collectively, Church), appeal as of right the trial court order granting summary disposition under MCR 2.116(C)(10) to third-party defendants, JPMorgan Chase Bank, Bank of America, U.S. Bank, Hong Doan, Howard Hanson III and Catherine B. Hanson (the Hansons), Michael Colman, William Davidson and Laura Davidson (the Davidsons), and denying Church the same. We affirm.

I. BACKGROUND

Church was one of many contractors that were hired by Crosswinds Communities, Inc. (Crosswinds) and Hitchingham Development Company, LLC (Hitchingham) to construct the Eton Street Station II condominium project in Birmingham, Michigan. The project was funded by a $13,201,800 loan from Citizens Bank¹ that was secured by a mortgage on the entire project. Church provided supplies to Hitchingham for work performed on Units 60 through 68 of the Eton Street project. This resulted in Church asserting construction liens on those units. Church also performed work on Units 24, 30, 72, and 73. Church was provided with four separate mortgages for that work in the amount of $20,000 each.

Litigation in this case began in July 2008 when contractor Stock Building Supply, LLC (Stock) sued Hitchingham, its guarantor Bernard Glieberman, and Crosswinds, after Crosswinds and Hitchingham defaulted on their contract to pay Stock for construction services on the Eton Street project. Stock initiated an action to foreclose on its construction liens and to notify the court of the priority of its interests in the project. Stock's complaint listed several other contractors, including Church, as parties that might have had an interest in the condominium project. Church filed its cross- and counterclaim for damages on August 26, 2008, seeking recompense for its liens and mortgages. In September 2008, Citizens Bank, as senior mortgage holder, filed a cross-complaint requesting foreclosure of all mortgages on the project, including those mortgages belonging to Church for Units 24, 30, 72, and 73. Citizens Bank also moved the trial court to appoint O'Keefe & Associates (O'Keefe) as a receiver to complete the construction and sale of the Eton Street project. On October 15, 2008, the trial court entered an order for O'Keefe to act as receiver, making O'Keefe the fiduciary for all parties interested in the property.

At issue in this case are the sales of condominium Units 24, 30, 72, and 73 between July 2009 and August 2010. In July 2009, O'Keefe reported to the trial court that it received an offer to purchase Unit 24. On July 14, 2009, the trial court entered an order approving the sale that stated the property was to be conveyed "free and clear of all claims, liens and encumbrances without redemption periods, with the proceeds received therefrom to be distributed in accordance with the same priorities as held prior to consummation of such sales." Church's attorney signed the order without objection. The property was conveyed by fiduciary deed on August 18, 2009. In September 2009, Church entered into a confidential settlement agreement with Citizens Bank in which Church agreed to extinguish its liens on Units 60 through 68 in exchange for $55,000. The last clause of the settlement agreement stated: "It is expressly understood that this Agreement shall have no effect on the [Church] Mortgages, which shall remain in full force and effect." Following that settlement, the trial court entered a stipulated order dismissing Church from the case with prejudice.

Thereafter, for each unit sold in the condominium project, including Units 30, 72, and 73, O'Keefe presented an offer to purchase to the trial court, and the trial court entered an order approving each sale and permitting O'Keefe to proceed. Every order contained language that the sale was "free and clear of all claims, liens and encumbrances without redemption periods, with the proceeds received therefrom to be distributed in accordance with the same priorities as held prior to consummation of such sales." Church was provided notice of the orders permitting the sales of the units and the distribution of the sale proceeds from each property to Citizens Bank as senior lienholder. Church did not challenge the sales until nearly three years later, on September 11, 2013, when it moved the trial court to reopen the case, arguing that it still maintained mortgages on Units 24, 30, 72, and 73.

Church asserted that the settlement agreement between it and Citizens Bank explicitly stated that the mortgages on the four units were still in full force and effect and that it never foreclosed on those mortgages or voluntarily discharged them. Citizens Bank filed an opposing brief, arguing that Church's motion was untimely because the disputed units were sold more than three years earlier. Additionally, Citizens Bank argued that it was entitled to the proceeds from the sales of the units because it held the senior mortgage and had not been fully recompensed for that mortgage. The trial court issued an order on October 10, 2013, that: (1) granted Church's motion to reopen the case, (2) ordered Church to file a separate motion to amend its counter- and cross-complaint to add the parties now in interest to those properties, and (3) ordered Church and Citizens Bank to brief whether the orders approving the sales free of liens and encumbrances extinguished the mortgages held by Church.

Church's motion and brief filed on December 19, 2013, maintained that its mortgages were not discharged and additionally argued that the trial court lacked authority to discharge a mortgage other than through foreclosure. Church moved the trial court to permit it to amend its complaint to include foreclosure of Units 24, 30, 72, and 73. In the proposed amended complaint, the purchasers and mortgagees of Units 24, 30, 72, and 73 were added as third-party defendants. Citizens Bank opposed the proposed amendment as futile, again asserting that the trial court had granted authorization to permit sales free and clear of all liens and encumbrances, including mortgages, under the Construction Lien Act, MCL 570.1101 et seq., specifically MCL 570.1123. On January 31, 2014, the trial court entered an order permitting Church to amend its counter- and cross-complaint to include foreclosure of the four units and to add the parties in interest to those units.

On September 30, 2014, Church filed its motion requesting summary disposition under MCR 2.116(C)(10) and judicial foreclosure of the units under MCL 600.3115. Church asserted that the case was factually undisputed and that the trial court only needed to determine whether its previous orders had discharged Church's mortgages on the subject units. Church argued that because the orders never mentioned the mortgages, the settlement agreement explicitly stated that the mortgages would remain, and that, there being no statutory law or caselaw providing the trial court, via a receiver, the authority to judicially extinguish the mortgages, summary disposition was required in Church's favor.

Third-party defendants JPMorgan Chase Bank, Bank of America, U.S. Bank, Hong Doan, the Hansons, and Michael Colman jointly filed their own motion for summary disposition under MCR 2.116(C)(10).² Therein, they argued that the mortgages were extinguished upon the entry of the trial court's encyclopedic and unambiguous orders approving the sales. They asserted that the trial court had power to discharge the mortgages via a receiver sale pursuant to MCL 570.1123(2) and that Church's claims should be barred by the doctrine of laches because Church's three-year delay in asserting any rights prejudiced them. Lastly, the third-party defendants claimed that Church's foreclosure action was an impermissible collateral attack on the trial court's previous orders approving the sale of each unit. The Davidsons filed a brief adopting the arguments of the other third-party defendants and asserting that summary disposition was required under MCR 2.116(C)(10) in their favor for the same reasons just discussed.

On December 17, 2014, the trial court heard the cross-motions for summary disposition. To start, the trial court indicated its belief that the crux of the case relied on the power granted to the trial court by MCL 570.1123(2). The parties agreed that even after the sales by the receiver, Citizens Bank's senior mortgage was still not satisfied. The parties differed, however, on their reading of the statute. The parties argued consistently with their briefs, and the trial court took the motions under advisement.

On January 9, 2015, the trial court issued an order granting the third-party defendants summary disposition and denying Church's motion after having determined under MCR 2.116(C)(10) that no genuine issue of material fact existed regarding whether the orders approving the sale of Units 24, 30, 72 and 73 discharged Church's mortgages. The court held that the clear language of its orders and the declaration of O'Keefe that the intent of the language "free and clear of all claims, liens and encumbrances" was to include Church's mortgages established that Church's mortgages were included in the orders. The court also held that MCL 570.1123(2) granted the...